Assembly OKs Bill to Rebuild Edison’s Finances

Despite threats of a ballot backlash, the state Assembly late Thursday approved a $2.9-billion bill to restore Southern California Edison to something close to financial health.

Passage by a 41-32 vote, almost along party lines, came only after the Legislature’s Democratic leaders arranged for Democratic Assemblyman Gil Cedillo, who had been home in Los Angeles with his ailing wife, to fly to Sacramento for a late evening vote.

The bill must still be reconciled with a different version that passed the Senate in July.

The bill would allow Edison to float bonds to pay off about three-quarters of the massive debt it accumulated during the energy crisis. The company would have to find its own way to handle the remaining debt of about $1 billion.

The bonds would be paid off by the top 180,000 of the utility’s large and medium-sized business consumers. Homeowners and smaller businesses would not be burdened with the cost.

Gov. Gray Davis and other supporters of the bill say the bonds could be paid off without any additional electricity rate increases, but foes of the bill have challenged that assertion.

Even without a rate increase, the bill has been bitterly opposed by consumer activists, who have labeled it a bailout and have threatened a ballot initiative to reverse it. The prospect of running for reelection next year with such an initiative on the ballot has spooked many lawmakers, deepening their reluctance to vote for the bill.

But Edison and Davis have spent weeks lobbying intensely for votes. Majority Democrats argued that keeping the utility out of bankruptcy was in the public interest. Minority Republicans charged that the bill might not actually keep the utility out of bankruptcy, but would certainly place an unfair burden on business.

“Have we lost our minds?” asked Assembly Republican Leader Dave Cox (R-Fair Oaks). “Has this body lost its sense of direction? People outside must be thinking, ‘These people must be drinking on the job.’ ”

The Assembly action was by far the most significant step in what has been a controversial six-month crusade to rescue the Rosemead-based utility through government intervention--a circus-like process that has flooded the Capitol with lobbyists for every special-interest group imaginable.

But the bill, SB 78xx by state Sen. Richard Polanco (D-Los Angeles), still faces major obstacles. The version that passed the Senate narrowly won approval. The Senate’s Democratic leaders are now concerned that changes made by their counterparts in the lower house have made the measure even more politically unpalatable.

One indication of the closeness of the vote came shortly before debate began about 9 p.m. as Cedillo (D-Los Angeles) arrived in the chamber. Cedillo had been home with his ill wife, but Democratic leaders, needing his vote, arranged for him to fly back to Sacramento.

Senate President Pro Tem John Burton (D-San Francisco) said Thursday that he and his colleagues would need a few days to review the dozens of amendments recently added to the bill. He predicted the upper house would probably make changes of its own and send a new version of the bill back to the Assembly for a final vote by Sept. 14, the deadline to pass legislation this year.

Consumer activists vow to continue their efforts to thwart the rescue plan in the Senate.

“This is one of those devastating displays of disregard for constituents’ needs and consumer needs,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. “At the end of the day, the people of the state of California are going to have to depend on John Burton and the Senate to stop this obscene giveaway.”

This spring, Davis and Edison reached an agreement in principle for a government rescue of the utility. The company accumulated its huge debt last year and early this year when it had to buy electricity on the open market for far more than it could charge its customers under a state-imposed rate freeze.

But the proposal hit the Legislature like a ton of bricks, and has struggled ever since. With polls showing that the public considered the utilities to be culprits in the energy crisis, lawmakers have worried about the political consequences of voting for legislation perceived as a bailout. And five years after approving a landmark deregulation of the state’s electricity market that was widely blamed for the problem, lawmakers worried about making another mistake.

Many lawmakers also wondered whether a utility bankruptcy was as harmful as supporters of the bill contend. California’s largest utility, Pacific Gas & Electric Co., chose to take itself into bankruptcy in the spring rather than seek a government solution to its problems, and the lights did not go dark in Northern California as a result.

But Davis and other supporters of the bill argued that the state’s only way out of the power crisis is to have the private utilities regain their financial health. That would allow the state to get out of the expensive business of buying power on behalf of the utilities’ customers. Bankruptcy would only further delay the state’s exit from the power business, they argued.

“This bill is complicated. It’s complicated in my view because the issue is complicated,” said Assemblyman Fred Keeley (D-Boulder Creek), who presented the bill to the lower house. “But it is in my view the last piece of the puzzle we need to put out this forest fire.”

Since January, California has spent billions of taxpayer dollars purchasing electricity to avert blackouts because the utilities were too encumbered with debt to continue supplying customers. State leaders hope to leave the power business in 2003.

Even so, the bill traveled a bumpy road in the Assembly. Lawmakers took out some elements of the plan to obtain votes in one committee, only to put them back in to get it through the next panel. And only a surprising Republican vote from Assemblyman Bill Leonard of San Bernardino allowed the bill to clear the Assembly’s energy committee.

In the end, the bill is considerably slimmed down from what Davis and Edison officials first proposed in the spring.

Under the bill, Edison would be permitted to use the money from its bonds to pay off the debt it owes banks and the state’s small, alternative energy producers. The company would use its own resources for the remaining $1 billion it owes large energy companies. Democratic lawmakers contend those companies engaged in price gouging during the energy crisis and are opposed to giving them all they are owed.

“We have been getting gouged by these guys for a year now, and this is our opportunity to give them a haircut,” said Assemblyman Dario Frommer (D-Los Angeles). “They don’t get any money from this, not one dime.”

Edison representatives say the plan should allow the company to recover financially--but that it falls short of guaranteeing it would be made whole.